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Arnold Kling

The New Deal, the Solid South, and the Dictators

Arnold Kling*

 
In Fear Itself: The New Deal and the Origins of Our Time1, distinguished political scientist Ira Katznelson recovers the intellectual climate and the political realities that influenced American history during the Roosevelt-Truman years, 1933-1952. He argues that the New Deal and American foreign policy succeeded in demonstrating the viability of liberal democracy but failed to achieve the ideals of liberal intellectuals. Among the factors that shaped this outcome, Katznelson focuses on the Southern white supremacist power bloc in Congress and the advent of nuclear weapons.

At the time of President Roosevelt's inauguration, in March of 1933, many leading intellectuals wanted to achieve what they perceived as the policy successes of contemporary dictatorships. What they admired in Italy or Russia were what they saw as organization and common purpose replacing the chaos, competition, and conflict that seemed to characterize market capitalism. They hoped to match the organization and common purpose, but by democratic means, and without the dictator-states' militarism, police-state terrors, and repression of dissent.

If the goal was to achieve the unity of purpose and (allegedly) efficient organization of the dictators without adopting their repressive methods, the outcome was somewhat ironic. Apart from wartime production in 1941-1945, the New Deal never was able to direct the economy with the common purpose, planning, and organization that was originally envisioned. On the other hand, the heightened focus on national security meant that the United States sometimes used measures, including internal espionage, intimidation, and incarceration that were uncomfortably similar to those of the dictators.

Thus, for Katznelson, the New Deal glass is one that is only half full. He says that the United States emerged in 1953 as a "procedural nation" and a "crusader nation." By the former, he means a political arena in which groups battled for their own interests, rather than one which aimed at an overarching public good. He writes,

As numerous critics, including C. Wright Mills, Michael Sandel, and [Theodore] Lowi have argued, this permeable state lacked instruments of collective civic purpose. The differences between political parties became less a matter of intrinsic ideology than a product of the interest groups with whom they identified.... (page 19)

In another passage, Katznelson writes that as the New Deal era ended,

U.S. politics increasingly came to be a politics of competitive bargaining among organized interests for the public purse. Under this system of pressure-group pluralism, lobbying grew...

This form of democratic politics was largely procedural. By establishing and policing rules, Washington convened a game dominated by organized interests. (page 400)

By the crusader nation, Katznelson means a nation that saw itself as having a mission to champion democracy against fascism, and subsequently Communism, while in the process adopting expedients that contradicted liberal democratic values.

Still, Katznelson emphasizes that,

In the United States, the legislature remained an effective center of political life... Its constitutional role was not supplanted. The Senate and House of Representatives continued, when they wished, to say no even to presidents at the peak of their popularity... It was, in short, the central operative role of Congress that most distinguished the United States from the forces of brutality and the absence of political competition that characterized the dictatorships. (page 20)

One of Katznelson's themes is that politics between 1933 and 1952 was affected by fear. He writes,

This is a book about democracy and fear. Faced with emergency, the New Deal urgently had to navigate dangerous borderlands where freedom and the lack of freedom overlapped...

Over the course of the Roosevelt and Truman Administrations, the country confronted three acute sources of fear. First was the deep worry that the globe's leading liberal democracies could not compete successfully with dictatorships... Parliamentary democracies were widely thought to be weak and incapable when compared to the assertive energies of Fascist Italy, Nazi Germany, Imperial Japan, and the Communist USSR...

While competition with the dictatorships created the first fear, exponential growth in sophisticated weaponry proved the second...

Fear about warfare and global violence became a permanent condition. It became an inextricable part of American consciousness, helping to produce an obsession with national security, one that risked political repression. The new nuclear calculus, more than anything else, altered the geopolitics of the world as we knew it...

The racial structure of the South generated the era's third pervasive fear, a source of worry for both its defenders and its adversaries. (page 8-13)

In my own view, the strongest case for using the term "fear" concerns nuclear war, particularly in the 1950s. Many Americans considered World War III a real possibility, and they were justifiably frightened by the prospect of a nuclear holocaust.

On the other hand, concerning the relative efficacy of democracy and dictatorship, I would be inclined to use the word "doubt" rather than fear. That is, many intellectuals at one point or another expressed doubts about democracy.

It is hardly uncommon to find intellectuals who believe that decentralized markets are chaotic, capricious, and misanthropic. On occasion, those with such beliefs have disparaged democracy and instead gravitated toward totalitarianism. Those who instead value the right of individual dissent and democratic decision processes tend to believe in a sort of collectivism that somehow emerges from and reflects the popular will. As we will see, Katznelson himself appears to fall within this latter camp.

Finally, the word I would use to describe the Jim Crow laws of the South is "divisive." Southern politics was irrationally attached to segregation, while the antipathy of the rest of the country increased. I would say that with the arrival of radio, television, and mass access to automobiles and air travel, the South was less able to maintain the conceit that its racial caste system was a matter of local autonomy about which outsiders need not concern themselves.

Roosevelt and Truman might have taken on Jim Crow, but they chose not to do so, because they needed the support of the Solid South on other issues. It was left to President Lyndon Johnson in 1964 and 1965 to leverage his legislative leadership skills and popular sympathy to achieve meaningful Civil Rights legislation.

Doubts about Democratic Capitalism

Well before the second World War, democracy was in retreat.

By 1933, the European map of democracies no longer included Russia, Germany, Italy, Portugal, Austria, Poland, Yugoslavia, Bulgaria, Romania, Hungary, Latvia, or Estonia. With the exception of Britain, Scandinavia, and (still) France, all of interwar Europe turned authoritarian, dictatorial, or Fascist. (page 105)

Katznelson attempts to recapture the sense of doubt and despair articulated by leading intellectuals in this period.

Delivering an address... on March 23, 1933, the very day the Reichstag passed its powers to Adolf Hitler.. Walter Lippmann sought to understand the time's deep uncertainty... He further identified the rupture between past and present—in the democracies as well as the dictatorships—with two revolutionary developments... First was the active and self-conscious participation in government by "the masses of men," making of "modern government in our Western World, even under the dictatorships," something of "a daily plebiscite." The legitimacy of any government thus had come to depend on its ability to solve problems and formulate policies to which the governed would offer consent, both active and passive. Second was the vastly enlarged scope of government action. "Never before has government been on so vast a scale, touching such numbers of men in the vital concerns of their lives. The interests which modern governments are called upon to manage are as novel as they are complicated," and they now included issues no nineteenth-century government had faced. These new questions included "the relationships between producers and their markets," "forms of economic organization," including a place for labor.... (page31)

I found it noteworthy that with Roosevelt not yet even in office, Lippmann already saw government as having taken on much more responsibility than in earlier times.

Bad omens for liberal democracy could be found both internally and externally. Katznelson writes,

The pressures on liberal democracy did not stop in the second half of FDR's first term. At home, the economic recovery left many millions in dire circumstances. An environmental crisis ravaged agriculture. Racial violence erupted. Anti-Semitism reared its head. Labor unrest grew. Demagogues talked louder. Of course it would be an exaggeration to state that the United States was on the verge of joining the democratic collapse that was spreading like a domino effect during the 1930s. But there were plenty of dangers at home and a continuing atrophy for liberal democracy abroad. (page 38)

Katznelson cites intellectuals who argued for a dictator or a president with "dictator-like" authority. There was famed State Department analyst George Kennan, who in 1938,

... started drafting a book recommending that the United States travel "along a the road which leads through constitutional change to the authoritarian state," a state he believed would have to be led by a specialized elite who "would have to subject themselves to discipline as they would if they entered a religious order." (page 32)

Also,

In the period leading up to Franklin Roosevelt's inaugural, Nicholas Murray Butler, Columbia University's president.. instructed the freshman class that the dictatorships were putting forward "men of far greater intelligence, far stronger character and far more courage than the system of elections." (page 115)

Around the same time,

Writing a series of widely noted articles for The New Republic under the rubric of "A New Deal for America," the economist Stuart Chase offered "a survey for a third road" between violent Fascist or Communist revolution, whose "road... is blocked," and a "business dictatorship" whose "road... has mud holes and soft shoulders." He called for "a third and last road," which "may entail a temporary dictatorship." (page 118)

In 1935,

William Ernest Hocking, the distinguished Harvard philosopher, declared that the time for political liberalism "has already passed," for it is "incapable of achieving social unity." Liberal democracy, he predicted, "has no future." ? Despite rejecting how "contemporary dictatorships have taken the easy path" in seeking to gain "social unity at the cost of the individual," he nonetheless argued that such a "total interest" would have to be more fully recognized in the United States by moving toward "a more unified society, capable of using its voice and its muscles, with a sterner internal discipline and a new emotional basis." (page 115)

A few years later,

A symposium of economists, sociologists, and political leaders convened in 1937 to discern how "planning, so far from being inimical to the democratic way of life," might come to stand "as one of its chief justifications and ultimate fulfillments." ?distinguished contributors—including the economist Wesley Clair Mitchell, the sociologist W. F. Ogburn, the anthropologist Margaret Mead, the political scientist Harold Lasswell, and the philosopher Sidney Hook—probed the prospects for democratic planning? As the decade was ending, the centrist Brookings Institution published an extended analysis of the steps that could build effectively on the New Deal's "shifts in the relationships of government to industry." Running some thirteen hundred dry pages, its two volumes ambitiously called for "a considerable extension of government power over economic life" to mold business firms, provide knowledge for effective planning, mold labor markets, adjust labor disputes, manage natural resources, and organize a welfare state. (page 373)

I found these citations a valuable reminder that we should not view the 1930s from a post-1989, "end of history" perspective. Francis Fukuyama's proclamation of the final triumph of liberal democracy and market capitalism was something that would not have been foreseen, or perhaps even imagined, during the Presidencies of Roosevelt and Truman.

The South in the Driver's Seat

A second major thesis of Fear Itself is that the Southern delegation to Congress played a pivotal role in the politics of the period. As a political entity, the South was firmly united in its devotion to its regime of racial segregation and to a one-party system, in which whatever contests for office took place within the Democratic party, with November election results never in doubt. The result was a bloc of Southern Democrats in the House and Senate who had an independent support base that was not reliant on the national party, who obtained committee chairmanships through seniority, and who otherwise wielded power even beyond their numbers. Katznelson writes,

At no time during the New Deal did the southern cohort drop below 44 percent of Democrats and 41 percent in the House. These numbers were sufficient to block any initiatives they did not approve... Even when the presence of Republicans in the House was reduced to a paltry 88 seats after the election of 1936, the 192 nonsouthern Democrats could not muster majorities on their own... Without southern acquiescence, the party's national program could not pass.

Katznelson shows, using both descriptive narrative and formal statistical analysis, that this Southern bloc changed its voting patterns over the course of the period his book describes. During the first Roosevelt term, this bloc helped thrust the early New Deal legislation forward. However, from then on, the Democrats from the South became steadily less inclined to vote with their Northern counterparts, constraining the ability to pass liberal legislation during Roosevelt's second term and confounding President Truman with a conservative agenda.

The South was noticeably economically underdeveloped at that time.

Issued on July 25, 1938, the fifty-nine page Report on Economic Conditions of the South ... stressed the region's poverty... The average income in 1937 for all Americans was $604; in the South, it was nearly half that, at $314. The average southern farmer had a gross income of just $186 a year, compared to $528 elsewhere... Southern poverty, the report concluded, was fully "comparable to that of the poorest peasants in Europe." (p. 171)

Katznelson says that the Southerners, as economic populists, found common cause with Roosevelt on regulating and reforming the financial system, freer trade, programs to aid to farmers, and using Federal assistance to develop their relatively impoverished region.

Most of the region's political leaders almost giddily propelled the New Deal's radical economic policies, a program that offered the South the chance to escape its colonized status while keeping its racial order safe. (p. 157)

Regarding the latter point, Katznelson notes that

Emblematic New Deal institutions, including the Civilian Conservation Corps and the Tennessee Valley Authority, were directed by explicit racists who limited black participation. (p. 160)

The Southern bloc was careful to avoid farm or labor legislation that would empower its African-American population.

Only a small proportion of black farmers, about one in ten, owned their own land. Others were sharecroppers, the vast majority, or tenants. By excluding these persons from New Deal legislation, it remained possible to maintain racial inequality in southern labor markets... with these adjustments, southern whites rallied to the New Deal (p. 163)

The South also looked favorably on the labor union movement as embodied in the conservative American Federation of Labor. However, as the more radical and racially progressive Congress of Industrial Organizations surged forward, the Southern democrats shifted loyalty.

A survey in the early 1940s noted how fully thirteen AFL affiliates excluded black members...

the new CIO unions... quickly became the most racially integrated institutions in American life. In all, these unions were the most important force in making it difficult for across-the-board southern support for the New Deal to persist. (p. 174)

Thus, even though Roosevelt won a landslide in 1936, his legislative position in 1937 was more precarious than it had been previously.

Katznelson writes,

The Fair Labor Standards Act constituted the last lawmaking victory of the New Deal's radical moment... It was a swan song to a time in the 1930s when the Democratic Party was transforming the ambitions and role of the government to tame capitalism and enhance economic security, and the prelude to ever-greater instances of southern defection from Democratic Party positions...

Even when the Fair Labor Standards Act finally was passed by the House on May 24, 1938... a majority of the negative votes, 56 of the 97, were casts by Democrats; and of these, fully 52 were by southern representatives. (p. 272)

Katznelson says that the South provided the earliest and strongest support for what became the "crusader nation." In a survey taken as World War II was breaking out in Europe, Katznelson reports only 17 percent support for immediate American military involvement or military efforts to prevent a German victory.

Southern responses were especially hawkish and anti-Nazi. A full 92 percent of those who responded in the South supported the British, French, and Polish Allies. Three in ten were ready to fight immediately or endorse American military efforts to prevent a German victory. Another 18 percent backed active aid to the British-French-Polish alliance. No other region came close to this policy profile. (p. 278)

Prior to Pearl Harbor, most of the important Congressional votes on aid to Britain and implementation of a military draft were extremely close. Katznelson writes,

Without the South, strict neutrality would have persisted, aid would not have followed so readily to U.S. allies, and no person would have been subject to conscription for longer than one year. Britain would have found it more difficult to resist a Nazi invasion, and the United States would have been far more vulnerable when Japan attacked (p. 281)

However, the war ultimately increased the pressure on the South to end its racial injustices. Katznelson pointed out that African-Americans

experienced massive demographic change, with more than three million African-Americans leaving the South for war-production jobs in the North and the West. (p. 341)

Katznelson recounts at length the story of attempts to pass legislation to facilitate voting by the armed forces. Because Southern legislators were caught between wanting to support fighting men and not wanting blacks to vote, the voting procedures established by these laws were so onerous that even the majority of white servicemen did not cast ballots.

Defending the NRA

Katznelson acknowledges that there is a consensus that the National Recovery Act's attempt at coordination and planning were not a success. However, he writes,

The negative verdicts that dominate historical memory and scholarly appraisal usually miss two quite fundamental aspects of the short-lived NRA. First is the law's sheer audacity. Invented under conditions of fear, the program's grand purposes, inventive arrangements, and elaborate means should not be underestimated. Second is the way this pioneering experiment was connected to other ambitious New Deal initiatives... it showed that it was within the scope of democratic public policy to use private consumer, worker, and business groups for public purposes.

... Though manifestly beset by problems when it closed down, the NRA never had the chance to learn and adjust, build institutional capacity, or mobilize public powers to fully create a more balanced economic system... Though the NRA was quickly gone, its ideas, which the Supreme Court could not eradicate, did remain robust. . .Later, the New Deal's short-lived configuration of democratic planning and corporatism was adopted as a model in much of postwar Europe, where administrative tools were developed with much success to achieve collaboration and egalitarian economic goals. (p. 245-247)

Katznelson finds vindication for central planning in the organization of armaments production.

the country learned to act as if it were one great unified corporation, a cohesive company that superintended economic, social, and military mobilization on an almost unimaginable scale. (p. 352)

Katznelson clearly laments the demise of government attempts to plan and coordinate the economy. As President Truman completed his tenure, a coalition of southern Democrats and Republicans ensured that

key features of domestic economic policy—including democratic planning, central government management of sectors of the economy, and corporatist patterns of bargaining among business, labor, and government—were cast aside... Further, with a corporatist role for U.S. unions blocked as well, political life came to be dominated by a pattern of interest-group politics that the era's political scientists came to call "pluralist," a form of democracy marked more by competition among organizations and lobbyists than by a sense of the public interest. (p. 370)

Katznelson writes,

the British economist Andrew Shonfield, the leading commentator on postwar capitalism in the West in the mid-1960s, underscored how, by the end of the Roosevelt and Truman years, with "public authority having been deliberately weakened," there was "no serious attempt to co-ordinate the various economic activities of the Government in the public sphere into a coherent policy endowed with purpose and direction."

... More than any other factor, we have seen, southern political power in Congress explains this unforeseen outcome. There was no lack of ambition or interest within the Roosevelt and Truman administrations for public policies to guide capitalism or advance union interests. Nor was there an absence of mass constituencies, or a lack of support among experts and politicians (p. 398)

After the war, the Truman Administration wanted to retain some of its planning apparatus. However, Congress forced an early termination of rationing and controls over wages and prices.

 

For more on these topics, see the EconTalk podcast episodes Michael Munger on Choosing in Groups, David Kennedy on the Great Depression and the New Deal, and David Rose on the Moral Foundations of Economic Behavior. See also Public Choice, by William F. Shughart II, in the Concise Encyclopedia of Economics.

Katznelson's lament for the expiration of democratic planning and coordination ignores two factors that many economists and political scientists consider important. One factor, sometimes called the knowledge problem, is that government officials are unable to obtain the knowledge that markets generate and process using the price system. The other factor, known as public choice, is that the incentives of government officials tend to be aligned with private interests rather than the public interest, even if the latter could be clearly defined and understood.

The knowledge problem is not merely a theoretical curiosity. In the postwar Europe of which Katznelson speaks, nationalized industries and corporatist arrangements produced stagnation, sclerosis, and high unemployment. For example, in the United Kingdom, Prime Minister Margaret Thatcher's curbs on union power and privatization of major industries are generally seen as necessary for revitalizing the British economy.

Public choice problems, too, are easily visible. The influence of lobbyists for the mortgage and housing industries, energy producers, large agricultural interests, and others, is quite evident. Katznelson appears to believe that this can be overcome by increasing government's economic responsibility, but it is not clear how this would cause political actors to suddenly shift their focus from special interests to the sort of common purpose Katznelson extols.

I believe that Fear Itself offers a valuable reminder about key factors in American politics in the Roosevelt-Truman years: the doubts that existed in the 1930s about the viability of democracy and capitalism; the fact that the bloc of southern white supremacists within the Democratic party often held the balance of power; and the way fears about security during World War II and the Cold War drove Americans to accept internal spying and repressive measures from their government.

The book also serves as a negative reminder. That is, Katznelson's failure to engage in any way with either the knowledge problem or with public choice shows that these important concepts still have a way to go in order to penetrate mainstream thought.


Footnotes
1.

Katznelson, Ira.Fear Itself: The New Deal and the Origins of Our Time. Liveright, 2014.


*Arnold Kling has a Ph.D. in economics from the Massachusetts Institute of Technology. He is the author of five books, including Crisis of Abundance: Rethinking How We Pay for Health Care; Invisible Wealth: The Hidden Story of How Markets Work; and Unchecked and Unbalanced: How the Discrepancy Between Knowledge and Power Caused the Financial Crisis and Threatens Democracy. He contributed to EconLog from January 2003 through August 2012.

For more articles by Arnold Kling, see the Archive.

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